American Accounting Association 2006 Midwest Region Meeting March 30 – April 1 Chicago, Illinois

Friday, March 31, 10:20 a.m.-12:00 noon
Concurrent session 2A - Discrimination and Corporate Responsibility (Public Interest)

Title: An Empirical Investigation of the Relationship between Corporate Social Responsibility and Executive Compensation: U.S. versus Canada

Lois S. Mahoney Eastern Michigan University	Donna D. Bobek University of Central Florida
Linda Thorne York University

ABSTRACT: Prior research has presented conflicting results about the relationship between executive compensation and corporate social responsibility (McGuire et al., 2003; Mahoney and Thorne, 2005). However, it is not clear whether the reported differences in the association between corporate social responsibility (CSR) and CEO compensation are due to the methodological approaches and data sets considered, or can be attributed to national institutional context. To address this question, our study adopts similar statistical and methodological approaches for the same time period and compares the association between CSR and CEO compensation for US and Canada. We consider three aspects of CEO compensation: salary, bonus and long-term compensation (LTC). Similar to prior research, our results suggest a significant association between CSR and CEO salary for both countries; however, there are differences in the nature of the association between salary and CSR for the two countries. It appears that while CEOs with higher salaries are less attentive to social issues in the U.S., in Canada, CEOs with higher salaries are more attentive to CSR strengths. We also find in both countries, the importance of institutional visibility (as captured by size in both countries and debt to equity in the US) for attention to CSR. We find no significant difference in the other aspects of CEO compensation (bonus and LTC) and CSR between countries. Our results identify the importance of salary, LTC and firm visibility for CSR, but also suggest that there are significant differences in the relationship between CSR and CEO compensation that are related to national institutional context.

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